Booklet 656 Form 433b Guide in OIC

Form 433A of Booklet of 656:

When pursuing an offer in compromise of IRS back tax debt, you’ll want to submit the 656 form 433b, unless you are a sole proprietorship and thus you’ll complete form 1040 to account for profits and losses. The form 433-A provides the IRS with justification in determining the lowest possible offer amount you can make in seeking offers in compromise.

How to complete 656: Form 433b

Section 1: This section requests basic information, for example your EIN, the identity of partners, officers, and LLC members.

Section 2: Next, the form asks for business asset details. This would include the company’s banking accounts, investment accounts, and notes receivable. Then it requests information on the business’s real estate, vehicles, and equipment. However, in relaying their worth, the internal revenue service permits you to exclude your equity in any income producing assets.

Section 3: This section requests your business income. The form requests your average gross monthly business income based on documentation from the most recent 6-12 months. Now, if you also provide a profit and loss report for the period, you can present an average amount of profit from these figures instead.

Section Four is where you should relay the specifics of business expenses. This would be details such as, your average gross monthly expenses of the most recent period 6 — 12 months (all verified and supported). And, if you will provide a profit and loss report for the period, you can give an average amount here.

Calculating the offer

There are two ways of calculating the offer amount here, this is dependent on whether it is your intention to pay the offer within a period of 5 months or extending passed a 5-month period. If you arrange to pay the offer in full within 5 months, the formula for repayment is as appears below.

[ 48 x Business income in excess of expenses] Total available assets

If you opt to pay beyond a five-month period, your minimum offer increases to the following amount:

[Business income in excess of expenses x 60] Total available assets

Whichever method you use, you must exceed zero.

Section 6

Lastly, the form 433-B asks for certain miscellaneous info this uses to consider the settling of your debt. As an example, this section queries whether your company has claimed bankruptcy. This question is important as your business is ineligible to receive an offer in compromise on its tax debt currently in a bankruptcy proceeding. This sectionalso asks if the business has any other affiliations, asks if any related parties owe money to your business, and seeks to find out whether your business has been party to any litigation. Also, it asks whether the company has unloaded any assets in these last 10 years at a discount.

You can discover more of our offers in compromise guide at
Kent CPA
Accountants & Tax Preparers in Kirkland
Accountants and Tax Preparers